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REPORT: From Stewardship to Power (ESADE - Institute for Social Innovation)

1.
From Stewardship to Power
Religious Organisations and
their Investment Potentials
Katinka C. van Cranenburgh, Céline Louche, Daniel Arenas MAY 2014
3iG
International Interfaith
Investment Group
"If negative screening is all you do, you are missing an opportunity."
Ecumenical participant

3.
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Foreword
Religious Organisations are among the world's longest term holders of investment assets. They
use these assets to fund their mission to help improve the world, whether that be in enabling
an individual to find a faith community to belong to, to make a contribution to the society in
their locality or to make a stand when such faith driven action is needed on the troubling
issues of the world.
Financial assets give Religious Organisations responsibility and power. Their responsibility is
to steward those assets in a way that is consistent with their teachings. This report helps us to
understand how a sample of Religious Organisations work to stand up for that responsibility, the
challenges that they face in doing so and ways in which they use their characteristics to help their
members understand their responsibilities. Their power is to be able to communicate effectively
and to make a difference for good to the behaviour of the businesses in which they invest. They can
do this through their investments, especially when faith groups act together, and through the sheer
numbers of adherents who care about the principles their Religious Organisation stands for.
The role of Religious Organisations that invest is threefold. First, at a time when the political
system has not been able, so far, to modify in a significant way the financial institutions respon-
sible of the crisis, faith groups may play the function of remedial agents. A second important role
is that of helping to expand the size of the market for socially responsible investment (SRI) and
in so doing to enhance the spreading of corporate social responsibility (CSR) practices- given the
strong synergies between SRI and CSR. Finally, the scaffolding of the present market system tends
to erode some of the values that sustain our civilization. Indeed, Schumpeter's creative destruction
applies not only to firms, but also to the moral infrastructure that gave rise to market capitalism
in the first place. Finance as if people mattered. This catchphrase concisely explicates the ultimate
role of faith groups that invest.
This report, like the reports which preceded it, 'Believers in the Boardroom' and 'From Faith to
Faith Consistent Investing', adds to the sum of knowledge about how Religious Organisations can
be effective investors, not only monetarily but also religiously. This report explores the most
effective ways to embed and display religious values in a challenging area such as the financial
one. It is honest and unbiased about the challenges as well as the opportunities when faiths
exercise their responsibility and power as investors. It is an encouragement to faith to help build
a better world, i.e. to help the economy to serve the common good.
Bologna, May 2014
Prof. Stefano Zamagni
Professor of Economics, Bologna University,
Adjunct Professor of International Political Economy at Johns Hopkins University,
SAIS Bologna Member of the Pontifical Academy of Social Sciences.

4.
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Introduction
Although limited in numbers and details, religious teachings are available to guide religious
investors or organisations wishing to invest according to their faith. While some Religious
Organisations ('ROs' for the sake of brevity) are very active in their attempts to integrate their
beliefs into their investment decisions, others refrain from doing so and perceive their financial
assets as secular resources to support their sacred core mission. In addition, many view their
fiduciary duty and related needs for returns on investment as contrary to applying religious filters.
We believe most ROs rule out certain investments seen as 'sin stocks', but refrain from actively
owning their shares.
Clearly, investment creates some tensions with religious principles. There will be exceptions but
it cannot be assumed that the companies in which religious groups own shares adopt policies or
practices that are fully consistent with the beliefs of such shareholders. The most cynical view of
firms is that they act solely out of financial self-interest — an approach that runs counter to most
social religious teachings. Yet pretending tensions do not exist will not make them vanish. Our
research indicates both greater attention to Corporate Social Responsibility (CSR) and more moral
uneasiness over questionable practices in financial markets. This combination has challenged ROs
to review their investment portfolios in an ethical light. Such entities are increasingly forced
to respond and take a stance towards their investment practices. Even in countries where trans-
parency of investments is not legally binding, ROs are increasingly asked what their investment
portfolios entail. While external pressure puts ROs in the limelight, we also noticed a more
positive stance towards faith-consistent investing. Our research reveals that active investing
gives ROs further scope to pursue their core missions.
This practitioners report provides insight into the teachings of several faith traditions and how
they are being interpreted in relation to faith-consistent investing. Although much has been
written about religion and the capitalist system, little has been published on the intersection of the
investment processes and religious teaching. This report does not claim to be complete but it does
yield insights into sacred teachings and their interpretations. In addition, we share the results of
our research projects with ROs, providing the reader with practical, real-life challenges and
opportunities facing religious entities investing in line with their beliefs.

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1. Religious Teaching
and Investing
In this section, we highlight the Judeo-Christian and Islamic perspectives on investing which
are a combination of religious law and ethics.
Research in the late 1980s and early 1990s revealed a deep rift between ROs' sacred (core) activities
on the one hand and their secular (supporting) activities on the other. Finance and investing were
positioned on the secular side and treated as irrelevant and secondaryI
. At the same time, ROs
have been described as pioneering in what today is known as Responsible Investment. In 1973,
HollenbachII
noted that American ROs needed to address social responsibility and investment
practices if they were to shape the relationship between church and society. During South Africa's
apartheid in the 1980s and early 1990s, Catholic religious orders in the U.S. struggled to set criteria
and strategies for pursuing their concerns with the corporations they invested in. Their concern
about how to combine the moral principles that flow from their beliefs with investment practices
goes back at least several hundred years. It can in actual fact be traced back three and half millennia
to the Jewish tradition. Still, the general perception is that ROs show a dichotomy between secular
finance and accounting on the one hand and their sacred activities on the other.
In this study, we focus on those ROs that are claiming to integrate faith in finance. They
demonstrate that the secular practices of ROs are more informed by theology than the literature
suggests. Earlier examples from the Church of England and the UK Methodist ChurchIII
proved
that an attempt was made to bring the church sphere closer to the secular world of finance. In this
report we provide examples of integration of the sacred and secular worlds and thereby oppose the
common view of finance as merely as a tool for churches to conduct their theological work. This
study outlines how churches' investments can be theologically driven and conducted.
Before describing the findings of our empirical research,
we highlight some of the sacred writings and their
interpretations in relation to faith-consistent investing.
We focus on the Judeo-Christian denominations since
those were the ones that took the most active part in our
study. Also, we provide a summary of the findings of our
former two research projects.
Catholic Tradition
The Catholic Church entered the credit and saving debate in fine style in 325 when The Council
of Nicaea forbade usury. They based the decision on Psalm 15, Verses 1 and 5: "LORD, who shall
abide in thy tabernacle? who shall dwell in thy holy hill?" and "He that putteth not out his money
to usury, nor taketh reward against the innocent." The leading churchmen of the day such as St
Jerome argued that forbidding usury among brothers in Deuteronomy had been universalised by
the prophets and the New Testament. Pope Leo the Great would even extend the prohibition by
declaring that lay people who practised it were guilty of seeking 'shameful gain'. It would continue
to be extended and enforced intermittently by church authorities until the eleventh century when
the revival of European learning and trade would present the occasion for a more detailed exami-
nation of the practice by scholars and a more nuanced articulation of the specific elements of its
prohibition by the church.
The related teaching of the church on the accumulation of wealth seems to be based squarely on
the stories and the cautions found in the Hebrew and Christian scriptures. Although the tradition
makes few explicit prohibitions on amassing wealth, it does contain many warnings on the blind-
ness and dangers that wealth may bring. One well-known warning concerns the slender chances
of the wealthy making it to heaven, to wit: "It is easier for a camel to go through the eye of a needle,
than for a rich man to enter into the kingdom of God" (Matthew 19:24, KJV).
In the Catholic tradition, wealth accumulation is linked to the biblical understanding of justice and
teachings on social and distributive justice. As expressed by Pope Benedict XIV in 1745: "If equality
is not maintained, whatever is received over and above what is fair is a real injustice." Almost three
centuries later, one of his successors — Pope Benedict XVI —set out in his 2009 Caritas in Veritate,
a guideline for all bishops, priests and Catholics around the world that business models must shift
from shareholder to stakeholder models. He also stated that business models aiming at more than
profit are not only more civilised but are also more competitive. Practical implications of theologi-
cal writings and their interpretations are found in investing. John Paul II taught that "… investment
always has moral, as well as economic significance" (1991), something that was confirmed by the
Vatican as being still valid in 2011, adding that capital can do good but requires due consideration
for the way in which the capital is generated and that no harm to individuals is done. In the Caritas
in Veritate we can also read that:
"What should be avoided is speculative use of financial resources that yields to the temptation
of seeking only short-term profit, […]and attention to the advancement […] of further economic
initiatives in countries in need of development." (40).

6.
Protestant Tradition
Reformers from the Protestant church built upon the early Catholic biblical interpretations of
usury and wealth accumulation. Max Weber, writing on Protestant ethics and Capitalism, referred
to Baxter, A Christian Directory (Part 1 Chapter 10, I, dis. 9 (paragraph 24 – see page 122). It states
that if God provides chances for gaining profit, He must have his reasons for doing so. It implies
that the church grassroots should take that chance of testing each investment in terms of solidarity.
Profits should be made without endangering one's soul or those of others and should be legitimate.
This is actually a 'calling' that should be adhered to in being a proper steward of God. One should
accept his gifts [the profits] and be willing to use them when and if God wants it. In short, in the
Protestant view the grassroots are expected to earn money and generate wealth, provided that it is
not to satisfy ego but for the greater glory of God.
As an example of Protestant guidelines on investing, The Methodist Church, a Protestant
movement that originated in the 19th century, offers its grassroots 'The Book of Discipline (2008)',
a product developed over 200 years outlining the most recent statement of how United Methodists
agree to live their lives together. One paragraph covers responsible investment and reads:
"… in the investment of money, make a conscious effort to invest in institutions, companies,
corporations, or funds whose practices are consistent with the goals outlined in the Social
Principles." This is further elaborated in practical terms through "… endeavour to avoid invest-
ments that appear likely, directly or indirectly, to support racial discrimination, violation of human
rights, sweatshops or forced labour, gambling, or the production of nuclear armaments, alcoholic
beverages or tobacco, or companies dealing in pornography." Besides these guidelines for negative
screening, The Book of Discipline also includes statements on actively engaging with the com-
panies one invests in: "The boards and agencies are to give careful consideration to shareholder
advocacy, including advocacy of corporate disinvestment."
Jewish Tradition
For a Jew, the source of a person's wealth is not morally neutral, although the acquisition of
wealth is seen as a legitimate activity in itself. In The Torah, the source text for Jewish wisdom,
it is unacceptable to make money from lending on interest to a fellow Jew. There is an obligation
derived from The Torah to give tzedakah to the poor and needy from a Jew's accumulated wealth
and income.
The Torah's principles are interpreted and made relevant to the times in which a Jew lives by the
vast literature known as Torah she b'al peh, or The Oral Torah. This process of interpretation
continues to the present day and authoritative sources, through a process of discussion and
argument. This in turn spawns teachings that should guide the investment policies of Jewish
organisations and individual Jews. The line of authority differs for the various Jewish denomina-
tions but essentially the principle is that current Jewish Law and ethics has its roots in Divine
revelation. Typical Jewish principles for investment might state that a proportion of funds are
invested in micro-finance to help the poor in moving out of poverty, avoiding damage to the
environment on the basis of the principle of ba'al tashchit, avoiding investments in activities that
damage health and in businesses that act in bad faith. A Jewish investor is thus required to assure
himself of the quality of governance in the company in which he invests.
There is an ongoing debate among contemporary Jewish business ethicists on whether: (1) a Jewish
minority shareholder should hold himself morally accountable for the actions of a firm he cannot
control; (2) he should divest when the firm's activities do not accord with his values. Given the
structure of today's investment environment and vehicles, this vagueness hinders the promulgation
of definitive Jewish investment principles.
Essentially a Jew should: (1) not obtain monetary benefit from activities that are forbidden in their
personal lives; (2) share responsibility for stopping damage arising from a business invested in;
(3) not let his investment harm others or foster activities forbidden to Jews. Thus, to give just one
example, while a Jew may invest in a company which is involved in armaments he should be con-
cerned and withdraw his investment or work to stop the company from selling arms irresponsibly.
98

7.
11
Islamic Tradition
Investing according to Islamic principles is as old as Islam itself and goes back to the 6th Cen-
tury. The principles are based on revelations contained in The Koran (‫)نآرقلا‬ and the precepts and
practices preached by the Prophet of Islam, Mohammed. Both are included in Islamic Law (The
Shariah), which promotes balance and justice in investment dealings and discourages excess.
According to the Koran, interest (riba) is prohibited. On the other hand, trade is permitted. The
Koran says "God deprives interest of all blessings but blesses charity."
All forms of business and investment activities fall under the general terms of mudarabah and
musharakah. Both are treated as fiduciary contracts, in which unblemished honesty and fairness
are considered absolutely imperative. Mudarabah is an agreement between two or more persons
whereby one or more of them provide finance, while the others furnish entrepreneurship and
management to carry on the business venture. The ensuing profit is shared by the parties in an
agreed proportion. The loss is borne only by the financiers in proportion to their share in total
capital. Musharakah is a partnership between two or more persons in which all have a share in
finance as well as entrepreneurship and management. This may not be necessarily in equal propor-
tion. There are other variations on these two basic approaches and Islamic banking and finance
espouse these principles under a whole range of products and services, whether for consumers or
corporations.
The modern Islamic finance industry and with it, investment opportunities, are relatively young
compared with conventional banking and finance. This alternative investment and financial
opportunity, which was introduced in the 1970s, is now global and growing fast spreading its scope
to institutions for savings, development finance, insurance and income funds. When it comes
to Islamic finance, much data is available. There are over 500 Islamic financial institutions,
including 300 Islamic banks in about 75 Muslim and non-Muslim countries. The assets are
estimated at about $1 trillion in 2010 and this is growing at a rate of about 14% per annum. The
Dow Jones Islamic Market Index (DJIM) was established in 1999 to provide a benchmark for the
performance of Islamic investment funds.
Over the last decade, several theological leaders have provided guidelines for the grassroots on how
to invest according to one's faith. The recent Caritas in Veritate by Pope Benedict XIV (2011) as
well as the numerous products and services for Sharia-compliant investing are a few examples of
theological influence in this field.
Our former research findings
In monetary terms, religious investors are the third group in the world (UN, 2009), yet, surpris-
ingly little is known about the investment practices of ROs. Are ROs investing according to their
faith? If so, how do they do so? Most public information on ROs' investing comes from the USA,
where it is common to publish both investment portfolio information as well as investment
policies. In the UK, ROs are a little less forthcoming than their American counterparts. In stark
contrast, an in-depth web search on ROs in Continental Europe and Australasia provides little
to no insight on religious investment portfolios or policies. Christian, and in particular Catholic
organisations are among those ROs furnishing the most information. This became evident when
in 2009 we asked close on 700 ROs from the World's largest religions to take part in our study. In
the end, we received almost 100 responses of which 90% were Christian (of which 68% Catholic).
Over half of the respondents were from the USA and another quarter from the UK. What became
clear was that the respondents were active in their attempts to incorporate their faith beliefs into
their investments. The table below shows the main findings of the 2010 research.
Key findings 'From Faith to Faith Consistent Investing. Religious Institutions and their
Investment Practices', 3iG, ESADE, Vlerick, August 2010.
1. Respect to Faith
Not only do ROs believe it is important to incorporate faith beliefs in their
investments, to a large extent they also practice faith-consistent investing.
2. Beyond financials
ROs are more driven by the impact they can have on company behaviour or society
than by the financial returns.
3. Faith Investor Identity
ROs hardly mix with the general Responsible Investment community. However, the
activities do not differ much from those of the responsible investment community.
4. Impact Investing Revitalised
ROs have a slight preference for investing in projects or companies that do good,
rather than adopting 'best in class' approaches.
5. Beliefs versus Practices
ROs depend on the offerings of financial institutions. The current investment market
is not capable of providing tools and services that are required by faith institutions.
6. Regional Differences
Although the investment opinions of faith institutions in the USA and outside it do
not differ significantly, their practices and attitudes do.
10

8.
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Besides our former research on responsible investment practices, a limited amount
of research has been done on shareholder engagement. Narrowing down the publications con-
nected to the religious nature of ROs, we highlight the work of Kreander (2010), who outlined how
the Church of England and the UK Methodist Church linked faith with their investments. Our
2012 research on religious shareholder engagement among a Roman Catholic, an Anglican and a
Quaker organisation adds to these case studies. These in-depth studies provided a first insight on:
(1) how ROs argue their investments from a religious standpoint; (2) how RO governance structure
influences their engagement as shareholders of companies and funds in capital markets. Table 2
shows the main findings of RO shareholder engagement activities considered best practices in
the field.
Key findings 'Believers in the Boardroom, ROs and their Shareholder Engagement
Practices', 3iG, ESADE, Vlerick, May 2012.
Key success factors Challenges for the future
Seriousness of intent Defining success
Definite mission Measuring impact
Grassroots networks Global investment complexity
Insider knowledge Variety of governance structures
Collaboration Collaboration with non-religious investors
Access to top management
Local proximity to the company
Membership of facilitating organisations
Persistence
Out of the actors undertaking social shareholder engagement, our research revealed that ROs are
consistently found to be the most activeIV
. Of active faith-consistent investors, 90% believe that
active ownership of shares can influence corporate behaviour and over 50% indicated they were
engaged as shareholders. Engagement takes the form of proxy voting, writing letters, filing share-
holder resolutions, meeting company representatives and divesting. Such investors carry consider-
able weight with company management. Umbrella organisations further strengthen the hand of
ROs. Such organisations include: (1) the Interfaith Center on Corporate Responsibility (ICCR)
with over 300 members representing $100 billion in invested capital in the USA; (2) SHARE in
Canada, with assets under management of approximately $1.5 billion; (3) the Ecumenical Council
for Corporate Responsibility (ECCR); and (4) the Church Investors' Group (CIG) with combined
assets of £12-13 billion. The drawing up of collaborative strategiesV
is a further step in this
direction. These investor groups, which focus mainly on shareholder engagement, give religious
investors tools for acting upon their growing concern about the impact of their investments.
Engagement does not necessarily imply ROs disclose information on the size of their investment
portfolios. The Quebec-based investor group Regroupement pour la Responsabilité Sociale des
Entreprises (RRSE) has an interesting model for combining confidentiality and active share-
holdership. RRSE has set up a fund (Fonds d'engagement actionnarial) which allows its members
to engage with companies without having to disclose information on their portfolio. This fund also
enables organisations to engage even where they lack the legal or formal structure to do so on
their own.
With the above findings in mind, we have continued our
research and identified challenges and opportunities that
– when shared as learning material – can trigger other
ROs to go through the gruelling but often rewarding
process of aligning faith with investments.

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2. Methodology
The research took place over eight months, split into two periods. It included a literature
review, the mapping of potential religious investors practising faith consistent investing,
interviews and discussions involving researchers and active religious investors. The vast
experience and network of the 3iG executives contributed a great deal to the study.
Selection of organisations
The ROs were selected to reflect active players in the field, based on discussions with religious in-
vestor groups, research organisations, fund managers and other specialists in the faith investment
arena. The organisations included the participants from our 2012 research on shareholder engage-
ment practices. In addition to these, 9 Canadian, four Dutch, two US, one UK and one Indian
organisation were interviewed, bringing the total number of organisations analysed to 20. The ROs
represented were from Christian and Jewish backgrounds (See Table 3 for the full list of organi-
sations), as it was challenging to find ROs from non-Christian background to participate in our
study. The range of religious denominations, differing investment approaches and locations gave a
broad spectrum of insights into the challenges of and opportunities for faith-consistent investing.
Research method
The study was based on desk research and a series of interviews of 20 representatives of ROs,
conducted throughout October and November 2011 and from September 2012 to February 2013.
Conversations with key players in the investment decisions of ROs enabled identification of
key characteristics. Religious Investor Groups SHARE and 3iG provided access to most of the
interviewees.
Interviews were conducted either in person or by conference call and, with the exception of the
interviews held in Canada, at least two researchers were present at each interview. The interview
guidelines were limited to exploratory questions on tensions between faith and investing. This
allowed for open discussion of the background, the challenges, the opportunities and the develop-
ment over time of faith and investing. Interviews were recorded and interview notes were made,
both recordings and notes were used as the basis for this report.
Limitations
While the report showcases the various ROs active in faith-consistent investing, there are probably
many more ROs that do nothing in this field. Although we have reached out to the latter, we either
did not receive responses from them or found them unwilling to participate.
Last, as the research team was multi-national and multi-lingual, the research and interviews were
undertaken in English, French and Dutch.
List of Participating Organisations
The following ROs were interviewed and were key in the findings presented in this practitioners report:
Name Denomination Organisation
David Moore Baptist American Baptist Home Mission Society, USA
Elizabeth Scheafer Roman Catholic Augustinus Parish, The Netherlands
Donald Alexander Quaker Canadian Friends Service Committee, Canada
Peter Cross Quaker Canadian Friends Service Committee, Canada
John Reynolds Anglican Church of England, UK
Jeroen Crajé Protestant Konferentie Nederlandse Religieuzen
[Conference Dutch Religious], The Netherlands
Jeffrey Dekro Jewish Isaiah Fund, USA
Susan Seymour Quaker Joseph Rowntree Charitable Trust, UK
Sister Jeanne Devos Roman Catholic Missionaries of the Immaculate Heart of Mary, India
Father Séamus Finn Roman Catholic Missionary Oblates of the Mary Immaculate, USA
Sister Frances Brady Roman Catholic Our Lady's Missionaries, Canada
James Perry Ecumenical Panaphur, UK
Peter Eenhuisstra Protestant Pensioenfonds Predikanten [Preachers' Pension Funds],
The Netherlands
Sister Patricia Donovan Roman Catholic Sisters of St Ann, Canada
Laurence Loubiere Roman Catholic Global responsible investment research firm, Canada
Desmond Wilson Roman Catholic The Daly Foundation, Canada
Father Bill Davis Protestant United Church of Canada, Canada
Moira Hutchinson Protestant United Church of Canada, Canada
Sister Frances Ryan Roman Catholic Ursuline Sisters of the Diocese of London in Ontario, Canada
Wim Hasselman Protestant Woord en Daad [Word and Deed]
interdenominational protestant NGO, The Netherlands
Table 3: Participants in this study

10.
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"The stewardship question transcends all other conversations. Stewardship
of capital is the core part of being a faith-based endowment." (Ecumenical)
"If negative screening is all you do, you are missing an opportunity."
(Ecumenical)
From a religious perspective, beliefs are key to investor engagement. This contrasts with the secular
responsible investment community, which often struggles to articulate the main principles on
which investment should be based. ROs find this much easier precisely because they have strong
principles concerning Justice, Peace and Stewardship. A religious belief system allows ROs to act
in an exemplary fashion and may help them take a leading role in spelling out to management what
is expected of firms.
"In each area of policy there will be specific teachings." (Anglican)
"Being religious gives us a moral compass." (Roman Catholic)
"We don't distinguish between what is sacred and what's secular, we say
everything is sacred, our whole planet is precious." (Quakers)
"It is not always something that responsible investors or others will pick up
on because they don't involve an immediate tangible environmental or social
issue." (Roman Catholic)
"Faith-consistent investing is just a matter of taking stewardship
responsibility." (Ecumenical)
Grassroots Networks
ROs' grassroots networks were identified as influencing investments in various ways. Kreander
noted the role of clergy, who challenged the secular investment practices of their churches. In
response to clergy criticism, ethical policies were implemented for church investmentsVI
. From
another angle, and more prominent in our study; grassroots provide valuable information from
churches and missionaries in areas where corporations operate. Our research adds to the examples
of Anglican churches in Nigeria and Sudan sharing information on oil companiesVII
.
3. Current Strengths
of Religious Investors
Four key characteristics support ROs in making faith-consistent investments. In the following
section, we highlight the characteristics and we quote from the interviews to underline how
these characteristics can make a difference.
Religious Belief System
An important religious investor characteristic is the religious belief system, which leads to the
debating of issues that include but go beyond the social, environmental and governance themes
stressed by the Responsible Investor community. It is linked to ethics and finds its roots in the core
theme of exercising stewardship and shouldering responsibility for the state of the world. Many
religions and denominations lend varying degrees of support for environmental stewardship. It can
have political implications, such as in Christian Democracy. Religious teachings provide guidance
for everyday life and ROs strongly base their decision-making on their tradition's teachings. ROs
emphasised that they could not divorce their religious principles from their capital. Some stressed
that religious principles guided them and mentioned stewardship as the main teaching from the
Old- and New Testament as key to their activities. Although The Scriptures were not considered a
blueprint, they were interpreted and expressed by the religious investors. As an example, an
Ecumenical organisation stated "if we believe that God is Love and has a holistic concern and
care for all people, than we need to ensure that the operation of our capital does not conflict that
principle." For the Ecumenical investors, negative or positive screening was not sufficient: "As
owners of capital we have a responsibility to put that capital to work for God's purpose, which
actually is to build capacity and to reach out to marginalised and excluded people."
"We must be responsible and helpful to one another. This is part of the
Christian message. Otherwise we are just a sort of void or vacancy."
(Roman Catholic)
"Most people seem to think that if they screen their portfolio that is what it is
all about. But that is just the tip of the iceberg." (Ecumenical)
"What you are investing in is what you care about. If you own a company, you
must know what it is doing, where it stands, how it treats its employees and
how it is governed." (Ecumenical)

11.
18 19
ROs' close contact with their grassroots gives greater opportunities for actively engaging with the
companies invested in. 'Grassroots' are ordinary believers or church members who may be present
anywhere in the world. While they have a religious identity, they are also employers or the staff of
the companies that religious organisations invest in. In other cases, they work in the supply chain
or are part of a community that is affected by the business operations of a publicly-listed company.
Take the case of a seasonal worker in a sugar plantation in Ecuador. The plantation might supply
sugar for a soft drinks company in The United States. In the worker's local church community,
labour practices are discussed and the priest contacts his opposite number in the US regarding the
Church's global investments and engagements with the soft drinks company.
Grassroots networks not only signal issues but also provide access to large consumer communities.
Given that ROs often have a large networks following, informing and influencing those networks
works through to consumer behaviour and hence company sales. A Jewish ethical investment
organisation that decides to tackle the malpractices of a multinational making chocolate bars
engages with the company as a shareholder but may also ask its members to boycott products until
the firm has seen the light.
"Given the geographical breadth of our Church we often pick up information
before it reaches companies we invest in." (Anglican)
"The issue was brought to our attention originally by members of the Church
locally." (Anglican)
"Though we are small, we have missionaries in about 67 countries around the
world…about 47 of those who come from the so-called developing world."
(Roman Catholic)
"Bishops have power but the people closest to the ground are the people you
trust most to get your information." (Roman Catholic)
"We don't often like to engage a company unless we have some actual contact
on the ground with local communities." (Roman Catholic)
Long-Term Perspective
Having a religious belief system is closely linked to the third manifested trait of faith-consistent
investors, namely, taking a long-term view. Like pension funds and other institutional investors,
ROs invest with a long-term perspective. This allows them to engage with the companies they
invest in over longish periods; allowing the firm time to do the 'right' thing. Time is needed to
change the behaviour for a company, industry, or society at large. A combination of a long –term
perspective, consistency and persistence allows religiously active shareholders to create change.
Some of the engagement processes found among the ROs lasted for close on seven years. A
long-term perspective is also needed when looking into 'impact investment'. Direct investment
in projects with social aims is not something that can be done on a short-term basis and requires
engagement from the investor. Although a small part of the portfolio of religious investors took the
form of 'impact investing', it was seen as a very good (business) use of capital in terms of alignment
with faith values.
Since their set of beliefs is not easily shifted, consistency in their investment activities over time is
noted. Although new ROs are still being formed, the average lifespan of ROs is around 500 years —
making them one of the world's oldest kinds of organisations. The patience and persistence found
in ROs allows for flexibility in exploiting opportunities as they arise and leads to a learning process
which can be applied to future investment and engagement.
"…investing in a seven-year social venture fund might provide us a
modest return but during those seven years it has been reaching out to
the most marginalised and vulnerable people in society and giving
value to them." (Ecumenical)
"We keep asking over a period of time and in some ways the circumstances,
the personalities, or the market changes … can do it." (Roman Catholic)
"We have been at this for a long time and intend to be at it for a long time."
(Roman Catholic)
"We have been around for a couple of hundred years as an organisation so it
is not as if we have a campaign that is going to finish in a year or something
to accomplish and then we will go out of business." (Roman Catholic)
"…what sometimes may have been impossible under one CEO becomes
possible under another one…" (Roman Catholic)

12.
20 21
Inter- and Intra-Religious Collaboration
All the religious shareholders interviewed embraced collaboration with peers through religious in-
vestor networks. Although found in the USA (ICCR), the UK (ECCR and CIG), Canada (SHARE)
and more recently, also in Australia (ACCR), such networks seem absent on the European Conti-
nent. These collaborative groups — referred to as religious investor groups —are regarded as useful
as a platform for creating and pooling knowledge and as a power factor that provides the scale
needed to influence the impact of investments.
"What is very funny and happens a lot is that in the financial industry and in
the pension sector and especially at board levels, there are religiously involved
people. Wherever I go, I immediately get questions from these people who
have side-jobs working for local church boards et cetera. My name tag opens
doors and generates conversation. To a large extent that is the way I find my
directors." (Protestant)
"A broader base of experience and knowledge in terms of the issues."
(Roman Catholic)
"As Christians, we prefer to work with Christian people as you have a
joint platform of Christian values. But we have good examples of fruitful
co-operation with people and organisations of different religions."
(Roman Catholic)
"The benefits of scale and knowledge" (Quaker)
"We're still a small organisation so it's helpful to be able to share research."
(Quaker)
"The size of the shareholdings that the churches have together tends to mean
that you get more senior people in the company." (Quaker)
However, collaboration was not seen as a benefit per se. An Anglican interviewee stated, "In the
main where we can, we engage on our own", preferring private dialogue and saying that "It's much
easier to get a very clear position just within our group." In some instances collaboration involved
compromises, as pointed out by the Quakers: "There could be instances when you have to com-
promise your positioning because people perhaps weren't as prepared to take things as far as you
might." Although the literature claims that ROs represent a homogeneous group of investorsVIII
,
these statements show that diversity may make collaboration difficult. Acting on their own also
allowed some of them to take decisions more quickly. The Quakers recognised this: "The larger the
collaborative body, … the more complex it is to work together."
"We need a Memorandum of Understanding to make things clear when
working with different religions." (Roman Catholic)
"In the main where we can, we engage on our own"and "It's much easier to
get a very clear position just within our group." (Anglican)
Yet, it was also noted that the ever more global nature of the issues they were engaging in some-
times called for collaborative engagement. Working together can be a learning process in itself, as
recognised by the Quakers: "The collaborative way of working will get better and better and become
more and more important." This was confirmed by the Ecumenical interviewee, who mentioned
that the meetings of the religious investor group he was participating in became more interesting
each time round. While the governance of faith organisations was sometimes described as old-
fashioned, the rapid change towards a more progressive and pro-active approach by ROs was noted
as well. Two reasons given by ROs for this trend were: (1) gaining confidence from the process of
shareholder engagement and (2) viewing RO investments as a way of expressing their values as a
faith organisation.

13.
22 23
"Yes, a religious organisation should participate in
socially responsible investment experiences, advocacy,
and resolutions; that can be learned fairly quickly through
associations such as the Interfaith Center for Corporate
Responsibility." (Baptist)
"If you do not use your investments as social change
instruments you are neglecting to use an important
available tool." (Jewish)
"I am committed to social investing and in my view, all
investing should be mission-oriented. Whether you look at
it from a communitarian or religious perspective, social
investing is the way people should go."
(Jewish)
"We are asked all the time why we invest in social impact
projects. It is a wonderful way of telling people about our
faith. People are very sympathetic to our investment work."
(Ecumenical)
"What is encouraging is the search for meaningful investment
in life-supporting involvements today and in the future
anywhere in the world."
(Roman Catholic)
4. PotentiaL Strengths
for Religious Investors
Various ROs trying to integrate faith with investments find that having a religious belief
system, a long-term perspective, a grassroots network and inter or intra faith collaboration
give them opportunities for responsible investing. In our research projects, we sensed two ad-
ditional strengths — 'enthusiasm' and 'power' — that will potentially impact and enable ROs to
invest in a way that reflects their faith.
Enthusiasm
For ROs, investing has not historically been a part of their core work. The religious set out to work
with their hands, heads and hearts on fighting social injustice, helping the poor, educating people
and protecting a God-given world. When they started investing in financial markets in the second
half of the 20th Century, many sought merely to maintain their properties and pay for staff and
projects. As one Sister put it: "The investments 'came to us' and whilst they might not have the
same type of appeal as the 'real work' it needed to be according to our values." Naturally, involve-
ment in investing requires some knowledge yet while lack of knowledge might seem an insuperable
hurdle to some religious members, it seems all ROs taking part in our study had no difficulty in
identifying a Father or Sister who was interested in and enthusiastic about the topic. As long as the
topic was not approached from a financial perspective but from a values perspective, doors would
open. Increasingly, enthusiasm is found in investing according to one's faith. For many, actually
thinking about ones' investments and their impact was already creating a win-win situation:
"We should continue investing in the financial markets as that is a way to bring about change.
It is much more about awareness and enlightened investment."
For some, the problem of aging within ROs was turned into an opportunity. One elderly Roman
Catholic Sister said: "I love to vote our shares because then I can look through all the company
reports and better understand what the social issues are about." While physical barriers grew
with age, investing enabled the physically limited to remain active in expressing their values. The
religious work they used to do with their hands; nursing, helping the poor, teaching and so forth,
could now be pursued with the mind; drawing up an investment portfolio and engaging with
companies. For the Roman Catholic Sisters, their work became more intense and professionalised
and was opened up to all Sisters within the community who had a similar interest and a fair grasp
of economics. The organisation now works with a professional ESG research office (ESG referring
to Environmental, Social and Governance matters) but the Sisters are still actively involved in the
discussions.

14.
24 25
Power
Besides the growing enthusiasm of religious investors for actively managing their investments,
they are increasingly becoming aware of the power they wield. Although the religious organisa-
tion's moral 'compass' was decisive in guiding their investments internally, they did not use it ex-
plicitly in their dialogue and negotiations with companies. However, under certain circumstances,
representing a religious leadership organisation may well have played a role in their relationship
with companies: "I don't think most companies want to be put in a position of going against a
well-established and well-known religious institution"(Roman Catholic). This might be a way of
balancing of power asymmetriesIX
whereby ROs signal their influence or powerX
. While some of
our findings hinted that ROs' reputation and/or authority might exercise influence, the evidence
was too tenuous to state this as fact.
A Roman Catholic sister noted: "Engagement has made us more conscious and more aware about
the power of those investments […] we have no conflict within our portfolio because we engage."
"It speaks volumes when
a faith organisation
publicly divests from a
company."(Quaker)
"We have power if we want to use it. Lots of people don't know
about this power. We are strong and that has been confirmed
in everything that I have done in justice issues."
(Roman Catholic)
"Now I vote all our shares in all our companies."
(Roman Catholic)
"We represent a conscience. It is a challenge to be told by the
church that you are doing something that is wrong or that is
not in the best interest of society."(Protestant)
"I still think there is a remnant of respect for the church. If the
church takes a stance on something…. There are still people in
major corporations that think of themselves as religious
people."(Protestant)
"I am not particularly interested in power except in the sense
that we can really do whatever we need to in order to make a
difference."(Roman Catholic)
"What I notice is that we are seen as oddballs in a positive
sense. We are special – I hear from colleagues as well as from
fund-managers: "if you do it, we can do it!""(Protestant)
"Many people believe that if it [a shareholding] passed the
test in our committee than it must be safe. People do know us."
(Protestant)

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26 27
5. Challenges for
Religious Investors
While this research focused on ROs actively owning shares, many ROs are not involved in faith-
consistent investing. For many, lack of financial resources stops them from getting involved.
However, other ROs are not involved due to challenges and barriers. We expand upon the
fundamentals of investing, the limits of responsibility and the issues remaining.
Whether to invest or not
Within ROs, there are always a few members who find investing in company shares to be at odds
with their faith. This is so even in Quaker organisations, even though the Quakers have a history of
successful commercial businesses (for example, in transport, chocolate and insurance industries).
Some members want to stick to low-risk, sustainable bonds and exclude corporations. For them,
buying shares in order to gain access to a 'dirty company' and create change is inappropriate. A
contrary point of view was put by a Baptist investor: "If we did not have the capabilities to invest in
socially responsible ways, we would still invest in stock markets as we need to obtain these required
returns on our endowment fund to support our ministries and fulfil investment fiduciary require-
ments." For him, it was a question of being realistic: "It is not a perfect world and you don't want to
handcuff yourself and find yourself unable to support your on-going ministry."
A Jewish interviewee argued that in Jewish society, investments were regarded as helping to
create change: "Investments are made in order to earn as much as possible with the goal of using
dividends and earnings to do philanthropic work. The Jewish religious commitment to 'doing' as
preferable to 'believing' reflects an interest in getting a high financial return in order to get other
things done." The struggle experienced by some religious investors is one that requires dialogue
within the organisation and mostly does not result in a clear-cut decision on whether or not to
invest. Dialogue with grassroots more often leads to investing with care than not investing. A
Roman Catholic interviewee mentioned the tension between religion and investment: "It is
indeed a challenge but […] spiritual life and practical life should be integrated. Priorities need to
be set. Christian values can always be a guideline for the way you implement your investments and
business." An Ecumenical interviewee responsible for investing funds stressed the challenges of
participating in the financial markets. He felt the financial markets were increasing inequalities
in society and searched for alternatives. Part of the portfolio was invested in funds that applied
negative screening and ESG screens but this still failed to yield the desired results: "The data
suggest that, as a whole, financial markets have deepened inequalities. This is very ironic when
one considers that the charitable work funded by our investments stemmed from the need to re-
dress such inequalities." The idea that they were putting their capital to work in companies whose
actions had fostered greater materialism, 'short-termism' and environmental destruction was hard
to explain.

16.
28 29
Nevertheless, alternatives for the Ecumenical investors were limited, even though social and
impact investment markets were growing. Finally they made the decision to slowly shift from
investing with negative and positive screens to impact investing. Today, the funds dedicated to
impact investing grew to one third of their portfolio and their aim is to have half invested in the
financially riskier impact investing and half based upon screening.
In conclusion, the investment dilemmas for ROs link to the secular-sacred divide but are also
found when discussing fiduciary duties and return on investments — issues that are bound to be
of lesser importance when practicing impact investing. Nevertheless, the organisations we inter-
viewed all made an effort to respond to those dilemmas, fully acknowledging there was no simple
answer.
How far should one go?
Faith organisations differ in their ability to balance social returns against financial ones. Excluding
charity, we noticed that religious investors linked their investment decisions to the financial state of
their portfolio and fiduciary duties. While all practiced negative screening for almost their whole
portfolio, their engagement with their investments varied greatly. For some, a certain percentage of
their portfolio was used for positive screening and shareholder engagement, while others bought
shares solely in order to engage with 'dirty companies'. While some have the luxury of being able
to put a third of the portfolio into impact investments, others substituted part of their charity dona-
tions into impact investing. Others had not yet chosen impact investing as it would have forced
them to set resources aside for managing such social-impact projects. The difference with share-
holder engagement in the USA, Canada and the UK was that there were religious investor groups
for undertaking shareholder engagement whereas no religious co-operative groups had yet been
formed for impact investing.
As mentioned by the Quaker interviewee "Quakers view the world as being interconnected and see
things holistically." Nevertheless, full compliance with faith in finance is considered utopian; "it
would be hypocritical to just say we're not going to invest in mining companies but still continue to
use equipment made of aluminium or steel."The Quaker interviewee went on to say that engaging
with mining companies was seen as a way to practice faith and to improve things rather than to
force radical change by divesting. Improving business practices through social shareholder engage-
ment seems a compromise for ROs but the best alternative given the situation. Also the Church of
England indicated "It would be a delusion that the Church can act with entirely clean hands in the
area of investment." XIV
In our study, the ROs considered investing as compatible with faith but that
investing for profits only was no option. As the Oblates mentioned "If we own shares, we feel and
believe that we are obliged to own them actively and responsibly" and "as
faith-based investors we believe that our investment decisions and engagements have to be
consistent with what we believe." For the Oblates, the Catholic principles of care of creation,
good stewardship and the role of engaging with the world have proven important factors in the
way they invest.

17.
30 31
What issues remain?
While for some, the aging population in ROs is seen as an opportunity, others see the changing
demographic situation as a challenge. As a Roman Catholic interviewee said: "The churches do not
have the capacity to do what they ought to be doing, so they have simply let it slide." For some
organisations, aging was an issue as the elderly were holding on to their century-long way of work-
ing. A Protestant interviewee in his 40s mentioned "A religious institute consists of brothers and
sisters who are not accountable to anybody. The external world doesn't interest them." With the
change of generations comes a change in interest. A Jewish interviewee mentioned "The younger
generation has a particular interest in environmentally-related financial assets and an awareness
of the social impact of investments".
Yet some of the younger priests also seem to throw up barriers: "I have seen a number of priests
who are completely detached from the world and completely believe they need not to contribute
and just receive what they ask. They will send you an invoice for everything anywhere. They do
not have the perception that there is financial difficulty" (Roman Catholic investment officer).
With the lack of internal resources comes the role of the external financial advisor. Put boldly, the
financial advisors managing the money of ROs are keen to make the biggest returns. While ROs
emphasised the social justice side of the investments, the financial experts — even if repeatedly
instructed to accept lower returns on investment —could just not prioritise accordingly. A
Catholic organisation had 65% of their portfolio invested in low-risk products, sufficient to cover
the community's costs. With the other 35%, it aimed to create social change — making money with
that part was regarded as a by-product. The Sister in charge mentioned: "When we had a Catholic
financial advisor, things went smoothly but with the financial advisors from the bank we had
difficulty making them understand… they had to be stopped from just paying lip-service."
Some ROs blamed themselves for the confusion: "We don't do a very good job of being clear with
our investment manager about who we are or explaining some of our biases." (Quaker) Although
the investment manager was told which decisions he should take, the Quaker realised during the
interview that he had not expressed his values to his investment manager in the way he did when
being interviewed by 3iG. Also, during the discussion, he put forward the idea of sharing the
organisation's minutes of meetings with the financial expert, "… so that he understands better our
values and who we are." In the absence of knowledge of the religious clients' values, the financial
advisor would have no option but to take decisions based on his own training.
Clearly, the mind-sets of religious clients and bankers are so far apart that one might wonder
whether training and meetings alone can bridge the gap. While the banker and the religious inves-
tor may find it hard to reach common ground, the fact is ROs now wield more power through their
investment than in the past: "The bank has less power than before. More people form and raise
their opinion rather than simply follow their financial advisor. People are comparing banks now."
(Protestant) Another trend mentioned by several ROs is the hiring of experts from the financial
field but who have a religious background. These experts are found to provide a better counter-
weight to banks.
Both external and internal resources cost time and money and that might be a barrier for
faith-consistent investing. As a Baptist investor said. "The socially responsible investment
resource problem might be the major cause in terms time allocation or hiring additional staff;
and perceived lower returns."
Apart from the gap dividing the religious and financial worlds, there is the scale and complexity
of the financial products offered. A Quaker, although very active in his organisation's shareholder
ownership put it bluntly: "I am sure that there are still companies we invest in that we know
nothing about." The need for less complex investment products was an outcome of the 2010 study
among 100 faith groups, where almost one in three respondents noted the complexity of financial
offerings and their incompatibility with religious principles.

18.
32
A final note..
ROs have been credited with a number of successes through engagement. These include the end of
apartheid in South AfricaXI
, pressuring Shell to be more transparent on social and environmental
issuesXII
, forcing Goldman Sachs to disclose more on how counter-party risk was managedXIII
.
Even so, debate continues to rage on the extent to which ROs' engagement achieves societal
change. Measuring the impact of their investment activities remains hard and in some cases
success seems to be limited to sharing information on controversial issues, in which share-
holders peddle a 'soft' approach and fail to make clear demands or set deadlines. Measurement
of the impact of religious investing might require a different approach to that used in secular
responsible investment models. As one Roman Catholic interviewee noted:
"Our impact investments are evangelical, bringing Christian values to customers through their
business practices: Measurement is done through 'life-stories'; witnessing how they are serving
the Lord in their daily life and what has changed in their life."
While this calls for further research and debate, this report focused on the experiences and
challenges of RO best practices when integrating faith with investments.
.
• Sacred writings are an important resource to
support faith-consistent investing.
• Investment policies and practices of religious
organizations are an expression of their beliefs.
• Faith-consistent investors can be powerful
advocates for the promotion of the universal
common good.
6. Conclusions
Over the last decade, several theological leaders have given guidelines for their grassroots on how
to invest according to ones' faith. The recent Caritas in Veritate by Pope Benedict XIV (2009) as
well as the recently revised Methodist Book of Discipline for fostering grassroots awareness and
participation in investment decisions are cases in point. Besides the growing number of theologi-
cal scriptures on the topic of faith and investing, we identified characteristics of religious inves-
tors that give them opportunities for faith-consistent investing. Religious investing is intertwined
with grassroots networks from which information can be gleaned and which may spark action
fostering active ownership of shares. The religious belief system gives ROs a basis for guiding their
work — unlike secular social actors such as responsible investors, NGOs and activists. Last but not
least, having a long-term perspective and working in collaboration with like-minded groups gives
ROs a powerful voice and stake in business and hence a greater chance of being taken seriously by
management.
Challenges — for example, whether or not the organisation should get involved in investing and to
what extent it should meddle in the companies it buys shares in — are often the subject of internal
debates of a fairly philosophical nature. The main practical barrier seems the clash between clergy
(who have become aware of the impact of their investments in recent years and who wanted quick
fixes to bring them into line with theological ideals) and conventional investment managers
(religious or not). The initial reaction of clergymen when confronted with 'dirty shares' is to call for
a faith- consistent investment policy. This reaction is then tempered when they speak to financial-
ly-skilled people, schooled in profit maximisation and who speak of fiduciary duty, commitments
and other portfolio demands. These demands have evolved over the years and when combined with
the complexity of the investment world, clergy are likely to withdraw their initial moral objections.
Many ROs have always been concerned with these social and socio-political problems and have
been active in tackling them. Early missionaries not only wanted to bring religious values to
populations in developing countries; they were also very concerned with the living standards of
the poor. Today, religion-based groups still see it as their responsibility to help those in need. With
the greying of ROs and the need for them to maintain their staff and serve their grassroots, such
entities increasingly rely on their investments in capital markets to pursue their activities. In vary-
ing degrees, the waning physical capabilities of church members are offset by the waxing financial
means for pursuing justice, care of the environment and integrity. Ever more religious investors
are aware that with a certain level of stewardship, enthusiasm and knowledge they can be powerful
players in capital markets.
The ROs interviewed in this study consider a rigid sacred-secular division impossible and wholly
faith-based investment as utopian. Investing in 'dirty companies' was seen as a way to improve
things rather than to radically change a system. Improving business practices through faith
investing seems a compromise for ROs but is the best alternative given the situation. Referred to
as the third largest group of investors in the world (UN, 2009), religious investors certainly have
a big impact on businesses and society at large through their investments, whether or not they
choose to wield influence.
33

20.
36 37
Information about the research institutions
About 3iG
The International Interfaith Investment Group, 3iG, is an international non-profit organisation,
founded under Dutch Law in 2006. 3iG seeks to promote more sustainable communities and
societies by promoting faith consistent investing across faith traditions. Its mission is to support
the efforts of faiths to improve their practice of positive social and environmental impact investing
and spread this message to their members and to society at large. Through a process that builds
interfaith relationships and co-operation, 3iG seeks to bring the wisdom enshrined in religious
traditions to the prevailing corporate and commercial culture and provide a moral compass for
guiding a sustainable business and financial model.
For more information: www. 3iGnet.org
About ESADE Institute for Social Innovation
The ESADE Institute for Social Innovation's objective is to develop personal and organisational
skills within the business community and non-profit organisations in order to strengthen their
activities and their contribution to a more just and sustainable world. The Institute's activities
span all areas related to the development of Corporate Social Responsibility, the improvement
of third-sector organisational management, and building relationships between companies and
NGOs. This commitment is a holistic response to the processes of transformation taking place in
the world.
For more information: www.esade.edu/research/eng/socialinnovation
About Audencia Nantes School of Management
Audencia Nantes is among Europe's top management schools and offers programmes that are
regularly featured in the top international rankings (The Financial Times, The Economist, etc).
Founded in 1900, since 2012 Audencia Nantes forms Audencia Group together with the Ecole
Atlantique de Commerce and SciencesCom.
For more information: www.audencia.com
3iG
International Interfaith Investment Group
Daniel Arenas
ESADE Institute for Social Innovation
daniel.arenas@esade.edu
Katinka C. van Cranenburgh
3iG, International Interfaith Investment Group
katinka.vancranenburgh@ 3iGnet.org
Céline Louche
Audencia Nantes School of Management
clouche@audencia.com